Base Your Energy Portfolio on Successful Schlumberger

Clearly, much of the focus in the world of energy during the second quarter was on Chesapeake Energy (NYSE: CHK) , where shenanigans at the CEO level led to all manner of contretemps, including a board of directors shakeup. More significant for an overall perspective on the industry, however, was a decision by Chesapeake's management -- followed by a group of the company's peers -- to curtail natural gas production in the face of sliding realizations for the now-pervasive fuel.

Schlumberger's spectacular scopeBut none of that should have been the key to expectations of Schlumberger's results. After all, while the big company is active in the North American gas scene, with 110,000 employees plying their trade in about 80 countries worldwide, Schlumberger was able to make considerable hay -- or, in reality, oil, gas, and revenues -- in a variety of international locations. And for our continent, if you take out Western Canada, the U.S. produced improved sequential results, based largely on a strengthening in the deepwater Gulf of Mexico.

So while the number of rigs drilling for natural gas in North America has shrunk, the combination of a revitalized Gulf and a variety of international locations bodes well for Schlumberger and its peers among the larger oil-field-services providers.

Indeed, in a very real sense, the past quarter demonstrated a pair of key strengths for the services sector that have long convinced me that the group is crucial to building an effective energy portfolio: First, as indicated, given its geographic spread, Schlumberger enjoys some immunity from a slowing in specific geographic arenas. Second, given the lengthy planning horizons inherent in the services business, the group is less likely than the producers it serves to be whipsawed by commodities cyclicality.

The beat goes onLooking briefly at Schlumberger's second quarter, the company reported a profit of $1.4 billion, or $1.05 a share, up 4.8% year on year, and $0.05 above the analysts' expectations. Revenues for the quarter were 16% higher than in the comparable quarter a year ago, coming in at $10.45 billion.

Geographically, revenue from Europe, the CIS -- generally the former members of the Soviet Union -- and Africa was 14% higher sequentially. Even more impressive was a 356 basis point margin hike in the region. Specifically, activity picked up in Russia's Sakhalin, Caspian, and Western Siberia areas, and Schlumberger CEO Paal Kibsgaard expects the country to be a focus of rapid growth throughout the remainder of this year. The revenues were 7% higher sequentially in the Middle East and Asia, with Kibsgaard pointing specifically to Saudi Arabia and the United Arab Emirates for their increased activity.

Schlumberger serves most of the international oil companies, the independents, and the national oil companies. Among its noteworthy customers during the quarter was BP (NYSE: BP) , for which its WesternGeco unit performed seismic acquisition projects both the U.K. North Sea and the Caspian Sea. Additionally, the unit garnered a two-year electromagnetics data processing contract with Brazil'sPetrobras (NYSE: PBR) . The work will be processed at Schlumberger's facility in Rio de Janeiro. And in the South China Sea, the company performed a technologically sophisticated logging and mapping project on a challenging horizontal well for CNOOC (NYSE: CEO) , the country's largest offshore producer.

The Foolish bottom lineKibsgaard was candid in summing up his expectations for both crude prices and Schlumberger's likely growth for the remainder of 2012:

The situation in the global economy remains unsettled, and it seems increasingly clear that the present macro uncertainties will remain for a considerable period of time. In this environment, we believe Brent crude prices, in general will be supported around current levels. ... Continued macro uncertainty could make customers more cautious. ... However, in the international markets, we have seen no signs of this so far. We maintain that, absent a future significant setback to the world economy, our safety view (is) that international activity will grow in excess of 10% this year.

As you likely can ascertain, I remain convinced that, given its global footprint, its broad customer base, and its technological sophistication -- clearly a product of expenditures exceeding $1 billion annually for research and development -- Schlumberger is an optimum foundation for Foolish energy portfolios. That's especially the case with the company's share price having slid about 27% in the past year.

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